Today the Republican Senate and House health leadership — House Energy and Commerce Health Subcommittee Chairman Joe Pitts (R-PA), full committee Chairman Fred Upton (R-MI), and Senate Finance Committee Chairman Orrin Hatch (R-UT) — released a discussion draft of a bill to extend funding for the Children’s Health Insurance Program (CHIP) (more on the name later). You can also look at the release and draft bill section-by-section summary.

So let’s start with the good news: there appears to be bipartisan agreement on the need to extend CHIP funding and perhaps even a desire on the part of the Republican leadership to get this done quickly. Senate and House Democrats have already released their plan calling for a swift and relatively clean four-year renewal of CHIP and President Obama included a four-year renewal of CHIP in his budget.

The bad news is that there are a number of provisions in the bill that will make children worse off.

Putting the “S” back in CHIP and other state flexibility provisions that don’t help kids …

Long time watchers of the CHIP debate will remember the history here – should the first letter of the program be “C” for children or “S” for states? The discussion draft puts the “S” back as the first letter in CHIP’s name, and this is no accident – some key features of the bill enhance state flexibility at the expense of children’s coverage.

First and foremost the bill eliminates the ACA’s maintenance of effort (MOE) requirement to keep eligibility levels for children stable until 2019. The MOE provision was intended to preserve Medicaid and CHIP coverage levels for children at a time of great change in our health care system, recognizing that Medicaid and CHIP together have worked to reduce the number of uninsured children to record lows. As we at Georgetown CCF have documented with our recent studies of Arizona, when a state is not subject to the MOE, bad things happen to kids. For those of you who may not have read these papers, Arizona is the only state today which is not subject to the MOE and the state dismantled its CHIP program with as many as 14,000 kids having lost CHIP coverage.

Second, one of the reasons that the situation for kids in Arizona is not worse is because many were helped by another provision of the Affordable Care Act that requires children from 100-138% of FPL to move into Medicaid from separate state CHIP programs. This protected more than 25,000 kids in Arizona who were able to transfer into Medicaid coverage when the state stopped enrolling kids in CHIP. The Republican plan would eliminate this requirement and give states the flexibility to move kids back to CHIP.

Nationwide, the so-called “stairstep kids” have benefited from this provision in a number of ways – most notably lower costs for kids in these low-wage working families because Medicaid has more protections in this regard. As a result of the ACA provision that this bill repeals, premiums have been eliminated in 8 states (AL, AZ, CA, DE, FL, GA, NV, and UT) for kids in this income range — likely resulting in enrollment gains. And 13 states (AL, CA, CO, DE, FL, GA, NC, ND, TN, TX, UT, WV, and WY) no longer have co-payments for children in this income range as a result of the provision that this bill eliminates.

The third proposal designed to “enhance state flexibility”, which would make kids worse off, is smaller fry but really terrible policy nonetheless. This provision would allow states to impose up to a 12-month waiting period for CHIP – currently they may not impose more than a 90-day wait, and we think that is too long — as regular readers of SayAhhh! know. My colleague Tricia Brooks is just about to blog on the trend among states to get rid of any waiting period for CHIP because they are bad policy that leaves kids uninsured and adds red tape and administrative complexity. Tricia just updated our report on why CHIP waiting periods are bad policy.

An unhelpful provision that LIMITS state flexibility…

The draft it not consistent in its pledge to provide state flexibility and proposes to limit state flexibility to respond to the varying economic conditions facing residents of different states.  The bill would limit CHIP coverage to 300% of the federal poverty line and cut federal matching funds to the lower Medicaid rate for kids between 250-300% of FPL. This would affect children in a whopping 29 states – 19 of which would lose all match for kids above 300% of FPL. You can see the list of states in Table 2 of our recent report with the Kaiser Commission on Medicaid here.

While we are on the topic of money, the draft would also reduce the enhanced Medicaid and CHIP match for translation and interpretation services for children for whom English is not the primary language.  It also ends the contingency fund, which provides relief for states that face a CHIP funding shortfall due to proven success enrolling and retaining eligible children.

On a positive note financing note, though, the discussion draft notes that the current funding formula seems to be working well. The draft seeks comments on the length of CHIP extension. Note, though, that the bill would repeal the ACA’s 23% bump in the CHIP match rate, which is a problem for states counting on that match for the next federal fiscal year. 

Concluding thoughts

While it’s encouraging to see the leadership’s plans to extend CHIP, this proposal comes with fine print that could reverse our nation’s progress in covering kids by leaving many working families paying more for their children’s coverage or with no affordable coverage option for their children. In addition, federal matching funds that are available today to cover kids at higher income levels that 29 states are using would be eliminated or reduced. That is not good news for kids.

So now it’s up to the two parties to come together for a workable compromise. It remains to be seen whether lawmakers can quickly get to “YES” on an extension of CHIP funding that won’t result in a “NO” to coverage for many families that rely on CHIP today for their children. Stay tuned…